Posted by John Vrooman on Sunday, January 3, 2016 in National Football League.

Interview with LA News Group. 

3 Amigos

There are two stadium proposals

1. Rams owner Stan Kroenke plans to build a new $1.9 billion stadium/residential/retail complex at the site of Hollywood Park, a former horse racing venue.

2. The Chargers and Raiders have another proposal for a $1.7 billion stadium project in Carson. I found an economic impact report on that one which says it would create 16,740 annual jobs, $1.1 billion in local labor income, $2.6 billion in total output (business revenues). They say on an ongoing basis it would support 7,560 jobs with one team and 13, 380 with two teams. And they say the ongoing total output (business revenues) would be $507 million with one team and $891 million with two.

I think these numbers tend to get inflated and I wanted to get your thoughts on what the real economic impact might be of both projects and what it would mean for Southern California.

The net local impact of a professional sports team is zero, if not negative sum, particularly for a NFL team playing in a monolithic space-eating stadium. The stadium are rarely used and the economic architecture is designed so as to hermetically capture almost all of the gains within the venue.

NFL team fan bases rarely travel well because of the obvious logistical problems and so most of the fans actually attending the game are locals. So the injection of new cash flow into the local economy is negligible because its coming at the expense of local spending someplace else. The indirect spinoffs are also small because the most of the spending leaks out of the economy like a sieve and so the urban/regional multipliers are usually zero, zip, nada.

There is probably some free advertising effect in the sky from national NFL broadcast but LA already sells itself. Ironically the biggest real impact is the intangible networking effect or water cooler effect that NFL clubs have on a community.

 The basic rule of thumb is to move the decimal point one place to the left on impact estimates from the chamber of commerce for the tourism industry. So the true impact of “$507 million with one team and $891 million with two”.is really closer to $50 million with one team and $90 million with 2.

 This is because impact studies ignore all of the negative costs of congestion and reduction in economic activity elsewhere in SoCal. The local sports bars will probably rock, but most direct spending at the stadium stays at the stadium. Stadium employment is usually in low wage and seasonal jobs which are not exactly the best drivers of economic development. For all of the something-for-nothing economic impact, somebody else in LA has to pay the price.

 Public spending on NFL stadiums in particular falsely prioritizes public agendas. What makes everything worse is that NFL clubs have the cash flow to privately fund most of the stadium costs. The public sector is on the hook for only the cost of connecting the stadium project to the economic grid.

 There is some indirect effect from downtown ballparks and arenas because they are used more often and the money spent tends to stay in circulation. But for a monolithic NFL stadium designed to hermetically capture all spending, used 10 times a year….not so much.

 Perhaps the most important issue overlooked in either the Carson or Glendale proposals is that there is no way that these smaller suburban governments can recapture a lion’s share of the economic spread effects throughout greater LA. Even if the venues are privately financed. They will experience the overhead costs of congestion that will far outweigh any economic gain that leaks out of the monolithic NFL stadium. Equally important most of the private finance schemes are full of property tax and bond funding loopholes that will pass a major share of stadium costs to local taxpayers. These win-win deals

 Unfortunately the costs will be shifted to the local economy and most if not all of the gains will accrue to the teams and the opportunistic owners of the NFL. Here are my estimates of what the capitalized gains are to the 3 amigos from a hypothetical move to LA.

 V